The whole thing has turned upside down because the federal government has now come up with two new changes to the scheme, which has many benefits such as higher interest income and tax incentives than many other major investment schemes in the market with 100 per cent protection from the EPF government.
EBM is usually the most important plan for those who plan to save money for retirement. The program is being used more by the super-rich and corporate executives than by ordinary people.
The most important reason for this is that there is no tax on the interest income earned on the amount invested in the scheme. But now the whole thing has changed.
Financial Act 2021
Similarly in the Financial Act 2021 filed by the Central Government in 2021 an employee is only tax deductible for investments up to Rs 2.5 lakh per annum in his EPF account and no tax deduction for investments made above that. For investments in excess of Rs.
The same benefits for everyone
The central government explained that all these changes were brought about not only to make the EPF account accessible to the general public but also to ensure that everyone benefits equally.
Budget Report
All these new changes were announced and implemented by the Federal Ministry of Finance at the time of filing in its budget report. Following this, the Federal Direct Taxes Authority introduced a new method of calculating the additional investment made in the EPF account and the interest thereon.
Central Direct Tax System
Rule 9D added a new rule under the Federal Direct Tax System August 31, 2021 Income Tax Rule 1962. Under the new rule, the BP has ordered that the amount invested in the BP account from the financial year 2021-22 be kept in one account and the ‘non-taxable amount’ in a separate account.
Calculation
With this system one can easily calculate the investment made in the BP account and the interest income available for it.
2.5 lakh rupees
According to the new rule change and calculation method, there is no tax on annual investment of Rs 2.5 lakh per annum. There is income tax on the investment made on top of that and the tax available on it.
3 lakh investment
For example, suppose you are investing Rs 3 lakh in a BP account. Of this, Rs 2.50 lakh will be deposited in a non-taxable account and Rs 50,000 in a taxable account.
Interest income
Of this, 8.5 per cent BP interest income of Rs 2.50 lakh is taxable at Rs 78,030, but interest income of Rs 2,125 on Rs 50,000 is taxable.
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